Commission working document on calculation, financing, payment and entry in the budget of the correction of budgetary imbalances in favour of the United Kingdom (‘the UK correction’) in accordance with Articles 4 and 5 of Council Decision 2006/xxx/EC, Euratom on the system of the European Communities’ own resources
Date: 2006-03-08
Institutions: European Commission
Subjects: Community budget, European Union membership, Member States' contribution, United Kingdom, budget policy, own resources

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 8.3.2006 
COM(2006) 99 final 

2006/0039 (CNS) 

Proposal for a 

COUNCIL DECISION 

on the system of the European Communities' own resources 

(//EC, Euratom) 

(presented by the Commission) 

COMMISSION WORKING DOCUMENT 

on calculation, financing, payment and entry in the budget of the correction of 
budgetary imbalances in favour of the United Kingdom (‘the UK correction’) in 
accordance with Articles 4 and 5 of Council Decision 2006/xxx/EC, Euratom on the 
system of the European Communities’ own resources 

EN 

   EN 

 
 
 
  
 
 
 
 
EXPLANATORY MEMORANDUM 

1. 

INTRODUCTION 

On  15–16  December  2005  the  European  Council  reached  a  political  agreement  on  the 
financial  framework  2007-20131.  It  also  called  on  the  Commission  to  prepare  a  new  Own 
Resources Decision and to modify the accompanying working paper on the UK correction in 
order  to  implement  its  conclusions  concerning  the  financing  of  the  European  Union. 
Paragraph 78 of the agreement on the financial framework attached to the European Council 
conclusions states: 

‘The  Own  Resources  Decision  and  the  accompanying  Working  Methods  paper  shall  be 
modified so that the ratification process for the Own Resources Decision can be completed 
by all Member States to allow entry into force from no later than the beginning of 2009 and 
in  order  to  introduce  the  changes  below.  These  changes  shall  take  effect  from  1  January 
2007, and will be applied retroactively if necessary…’ 

Moreover, the European Council concluded that: 

•  the  ceilings  of  own  resources  and  of  commitment  appropriations  should  remain  at  their 

current levels (§76), and 

•  the own resources arrangements should be guided by the overall objective of equity. These 
arrangements  should  therefore  ensure,  in  line  with  the  relevant  conclusions  of  the  1984 
Fontainebleau European Council, that no Member State sustains a budgetary burden which 
is  excessive  in  relation  to  its  relative  prosperity.  It  is  therefore  appropriate  to  introduce 
provisions covering specific Member States (§77). 

The  present  proposal  for  a  Council  Decision  on  the  system  of  the  European  Communities’ 
own resources and its accompanying working paper on the UK correction amend the existing 
own resources provisions. These amendments concern: 

•  Provisions  implementing  the  conclusions  of  the  European  Council  of  15-16  December 

2005 in the own resources area (see sections 2 and 3 below). 

•  Some  adjustments  of  existing  provisions  to  take  into  account  developments  since  the 
existing  Own  Resources  Decision  was  adopted  by  Council  in  September  2000  and  to 
improve the legal and linguistic consistency of the provisions (see sections 3 and 4 below). 

All references to Articles  below  refer  to the present proposal for  a Council Decision  on the 
system of the European Communities’ own resources. 

1 

Document 15915/05 CADREFIN 268 of 19.12.2005. 

EN 

2 

   EN 

 
                                                 
2. 

IMPLEMENTATION  OF  THE EUROPEAN COUNCIL  CONCLUSIONS –  PROPOSAL  FOR  A 
NEW OWN RESOURCES DECISION 

2.1. 

Fixed rate of call of VAT – first subparagraph of Article 2(4) 

The  European  Council  concluded  that  the  rate  of  call  of  VAT  shall  be  fixed  at  0.30  %  of 
Member States’ capped VAT bases. 

Under the current Own Resources Decision 2000/597/EC, Euratom2, the uniform rate of call 
of  VAT  actually  levied  on  Member  States’  capped  VAT  bases  is  established  by  deducting 
from the ‘maximum rate of call’ (currently 0.50 %) a ‘frozen rate’, which in turn is calculated 
according to a complex formula related to the size of the UK correction. 

Under the new system the rate of call will be fixed permanently at 0.30 %, which corresponds 
to  the  difference  between  the  current  maximum  rate  of  call  of  0.50 %  and  an  average  past 
value of the frozen rate of 0.20 %. 

The replacement of the current complicated and opaque system of calculating the VAT rate of 
call  with  a  fixed  rate  of  call  is  a  welcome  simplification  that  was  long  overdue.  The  link 
between the VAT rate and the UK correction via the ‘frozen rate’ is a historical relic from the 
pre-1988  own  resources  system  when  the  UK  correction  was  financed  in  proportion  to 
Member  States’  uncapped  VAT  bases,  whereas  since  1988  it  is  financed  in  proportion  to 
Member  States’  GNP/GNI3  bases.  The  establishment  of  a  fixed  rate  of  call  of  VAT  (the 
uniform rate) at its current level ‘is therefore a logical step, as the frozen rate’ does no longer 
fulfil any meaningful purpose. 

2.2. 

Temporarily reduced rates of call of VAT for specific Member States – second 
subparagraph of Article 2(4) 

The European Council concluded that for the period 2007–2013, four countries shall benefit 
from  reduced  rates  of  call  of  VAT  to  reduce  their  respective  budgetary  burden.  During  this 
period the rate of call of VAT for Austria shall be fixed at 0.225 %, for Germany at 0.15 % 
and for the Netherlands and Sweden at 0.10 %. 

2.3. 

Temporary  reductions  in  the  GNI  contributions  for  specific  Member  States  – 
Article 2(5) 

The European Council concluded that for the period 2007–2013, the Netherlands shall benefit 
from  a  gross  annual  reduction  in  its  GNI  contribution  of  €  605  million  and  Sweden  from  a 
gross annual reduction in its GNI contribution of € 150 million, expressed in 2004 prices. 

These gross reductions will be financed by all Member States, i.e. including the Netherlands 
and  Sweden.  These  reductions  are  not  intended  to  increase  the  size  of  the  UK  correction, 
neither  to  reduce  the  shares  of  the  Netherlands  and  Sweden  in  the  financing  of  the  UK 
correction.  The  gross  reductions  will  therefore  be  granted  after  the  calculation  of  the  UK 
correction and its financing. 

2 
3 

OJ L 253, 7.10.2000, p. 42. 
As from 2002 gross national product (GNP) was replaced by gross national income (GNI) in the own 
resources area. 

EN 

3 

   EN 

 
                                                 
This measure is intended to reduce the budgetary burden of these countries. 

2.4. 

Adjustment of the UK correction to enlargement – Article 4(1)(f), (g) and 4(2) 

The European Council concluded that the correction of budgetary imbalances in favour of the 
United Kingdom shall remain in full except for expenditure in the Member States which have 
acceded to the EU after 30 April 2004. 

Expenditure  in  these  new  Member  States,  with  the  exception  of  CAP  market  expenditure 
(agricultural  direct  payments  and  market-related  expenditure  as  well  as  that  part  of  rural 
development expenditure originating from the EAGGF guarantee section), shall therefore be 
excluded from total allocated expenditure for the purpose of calculating the UK correction. 

The reduction of total allocated expenditure shall be progressively phased in, starting with the 
2008 correction to be budgeted for the first time in 2009 and reaching cruising speed with the 
2010 correction to be budgeted for the first time in 2011, according to the schedule below: 

UK correction to be budgeted 
for the first time in the year: 

Percentage of enlargement-related 
expenditure (as defined above) to be 
excluded from the calculation of the 
UK correction: 

2009 

2010 

2011 

20 

70 

100 

The European Council also concluded that during the period 2007–2013, the total adjustment 
of  the  amount  of  the  UK  correction  resulting  from  this  reduction  of  allocated  expenditure 
shall not exceed € 10.5 billion, in 2004 prices. The proposed Council decision therefore lays 
down that the Commission services shall verify each year whether the cumulated adjustment 
of the UK correction exceeds this amount. If it does, the UK contribution to the budget shall 
be reduced accordingly. For the purpose of the calculation, the latest available GDP deflator 
for the EU expressed in euro as provided by the Commission shall be used. 

The  amount  of  €  10.5  billion  shall,  furthermore,  be  adjusted  upwards  in  case  of  further 
enlargement before 2013, except for the accession of Romania and Bulgaria. 

As soon as it has been phased in and provided that the ceiling of € 10.5 billion for the period 
2007–2013 is not breached, this adjustment of the UK correction mechanism will ensure that 
the  UK  fully  participates  in  the  financing  of  enlargement,  with  the  exception  of  the 
agricultural expenditure referred to above. 

As stated in Annex III of the agreement on the financial framework attached to the European 
Council  conclusions,  the  enlargement-related  adjustment  in  the  current  Own  Resources 
Decision, i.e. the reduction of total allocated expenditure by an amount corresponding to pre-
accession  expenditure  in  the  acceding  countries  in  the  year  preceding  their  accession,  shall 
cease to apply as from the 2013 correction to be budgeted for the first time in 2014. 

2.5. 

Review of the own resources system – Article 9 

The European Council  concluded  (§80) that the Commission should undertake a  full, wide-
ranging review covering all aspects of EU funding and spending and to report in 2008/2009. 

EN 

4 

   EN 

 
 
The  proposal  for  a  Council  Decision  therefore  lays  down  that  in  the  framework  of  this  full 
review,  the  Commission  shall  undertake  a  general  review  of  the  own  resources  system, 
accompanied, if necessary, by appropriate proposals. 

2.6. 

Entry into force and effect – Article 10 

The European Council concluded that the new Own Resources Decision shall be adopted so 
that the ratification process for the new decision can be completed by all Member States to 
allow entry into force from the beginning of 2009 at the latest, with retroactive effect as from 
1 January 2007. 

The provisions of previous Own Resources Decisions will continue to apply to the calculation 
of own resources and the UK correction for years prior to 2007. 

3. 

IMPLEMENTATION  OF  THE EUROPEAN COUNCIL  CONCLUSIONS –  PROPOSAL  FOR  A 
NEW ACCOMPANYING WORKING DOCUMENT ON THE UK CORRECTION 

The  accompanying  working  document  on  the  UK  correction  has  been  modified  in  order  to 
take into account the proposed changes in the Own Resources Decision. They concern: 

–  The date that the working document takes effect. 

–  The elimination of the adjustment related to pre-accession aid. 

–  The new adjustment related to expenditure in the new Member States. 

–  The  ceiling  on  the  total  reduction  of  the  United  Kingdom  correction  related  to  the  new 

adjustment above. 

–  The adjustment to further enlargement(s) of the ceiling referred to above. 

–  The elimination of the calculation of the ‘frozen rate’ and all references to the impact of 

the UK correction on the VAT call rate. 

Some other modifications have also been introduced to improve the coherence of the text and 
to facilitate comprehension. These changes are purely presentational and have no impact on 
the calculation method. They concern: 

–  The elimination of a redundant double calculation of the financing of the correction. The 
current working document reproduces the financing rules of the Own Resources Decision 
in  section  2  point  a)  and  b),  but  then  adds  in  point  c)  ‘In  order  to  ensure  this  result,  a 
corresponding  adjustment  of  the  GNP  bases  shall  take  place’.  This  provision  fulfils  no 
practical  purpose  and  it  is  therefore  proposed  to  simplify  the  text  and  only  retain  the 
calculation  method  laid  down  in  the  Own  Resources  Decision,  which  is  also  the  method 
presented in the financing tables of the annual budget. 

–  The mathematical presentation of the different steps in the calculation has been improved. 

–  The  presentation  of  allocated  expenditure  has  been  adapted  to  the  nomenclature  and 

structure of the 2007-2013 financial framework. 

–  Some purely linguistic and presentational improvements to the text. 

EN 

5 

   EN 

 
4. 

4.1. 

OTHER ADJUSTMENTS  TO THE CURRENT OWN  RESOURCES  DECISION 2000/597/EC, 
EURATOM 

Removal of distinction between agricultural and customs duties – Article 2(1)(a) 
and (b) 

Following  the  implementation  in  EU  law  of  the  agreements  concluded  during  the  Uruguay 
round  of  multilateral  trade  negotiations,  there  is  no  longer  any  material  difference  between 
agricultural duties and customs duties. The difference is not related to the duties themselves, 
but only to the character of the products (agricultural vs. non-agricultural) on which they are 
levied. 

In order to better reflect this situation the proposal for a Council Decision merges points (a) 
and (b) in Article 2(1) of the current Council Decision and slightly modifies the wording in 
order  to  remove  any  explicit  distinction  between  import  duties  in  the  agricultural  and  non-
agricultural field. As a consequence, the VAT-based resource becomes Article 2(1)(b) and the 
GNI-based resource Article 2(1)(c). 

Reference is still made to other levies, duties etc. that are no longer in force, since there may 
still  be  related  outstanding  customs  debt  in  the  so-called  B-accounts  (i.e.  related  to 
outstanding disputed claims). 

4.2. 

Application of significant statistical changes to GNI for own resources purposes 
– Article 2(7) 

According to the second subparagraph of Article 2(7) in the current Own Resources Decision 
‘Should  modifications  to  the  ESA  [European  system  of  national  and  regional  accounts]  95 
result  in  significant  changes  in  the  GNI  …  the  Council,  acting  unanimously  …  shall  decide 
whether these modifications shall apply for the purposes of this Decision’. 

There is, however, no reason why statistical changes adopted by the EU in order to improve 
the  methodology  of  ESA  and  to  achieve  a  more  accurate  intra-European  comparison  of 
economic  activity  should  not  apply  in  the  own  resources  area.  On  the  other  hand,  it  is 
important that agreed changes are applied in a uniform manner across Member States before 
they are used as a basis for establishing their own resources payments. It is therefore proposed 
to change the wording above to:  

‘Should modifications to the ESA 95 result in significant changes in the GNI … the Council, 
acting unanimously … shall decide when these modifications shall apply for the purposes of 
this Decision.’ 

4.3. 

Own resources and commitments ceilings – Article 3 

In  view  of  the  change-over  from  ESA  79  to  ESA  95  for  budgetary  and  own  resources 
purposes  and  in  order  to  maintain  unchanged  the  amount  of  financial  resources  put  at  the 
disposal  of  the  Communities  the  Commission  recalculated  the  ceiling  of  own  resources  and 
the  ceiling  of  appropriations  for  commitments,  expressed  to  two  decimal  places,  in 
accordance with the formula in Article 3(1) and 3(2) of the current Own Resources Decision 
2000/597/EC, Euratom. In December 20014, the Commission communicated the new ceilings 

4 

COM(2001) 801. 

EN 

6 

   EN 

 
                                                 
to  the  Council  and  the  European  Parliament.  The  ceiling  of  own  resources  is  set  equal  to 
1.24 % of the total GNIs of the Member States at market prices and a ceiling of 1.31 % of the 
total GNIs of the Member States is set for appropriations for commitments. 

The European Council of 15-16 December 2005 concluded that these ceilings should remain 
at their current percentage level, which is reflected in the present proposal for a new Council 
decision. 

4.4. 

Deleted references to reserves – Articles 2(6), 6 and 7 

The provisions in the current Own Resources Decision specify that revenue needed to cover 
the reserves shall only be called when these are needed. 

However, as from 2003 the Monetary Reserve no longer exists. Furthermore, in the draft new 
interinstitutional agreement (IIA) it is proposed to integrate the Emergency Aid reserve in the 
budget as a provision and finally, as mentioned in the draft IIA presented by the Commission 
on  1  February  2006,  the  reserve  for  guaranteeing  loans  to  non-member  countries  is  to  be 
transformed into a simplified provisioning mechanism whereby the appropriations necessary 
to provision the Loan Guarantee Fund will be entered in the budget, eliminating the need for 
any ad-hoc provision for the related call of resources. 

All  references  to  the  reserves  have  consequently  been  removed  in  the  proposed  Council 
Decision. As a side effect, this means that possible changes in the existing reserves would no 
longer require a modification of the Own Resources Decision (entailing unanimity in Council 
and ratification by Member States). 

4.5. 

Stream-lining of reference to adoption of implementing measures – Article 8(2) 

In  its  opinion  on  the  Commission’s  2004  proposal  for  a  new  Own  Resources  Decision,  the 
Court of Auditors criticised the proposed wording of Article 8(2) as well as its wording in the 
current  Own  Resources  Decision,  ‘insofar  as  it  interprets  the  subject  of  the  Court's  checks 
and  audits,  is  tantamount  to  amending  a  provision  of  the  Treaty  outside  the  procedure  laid 
down  for  that  purpose’5.  Furthermore,  the  Court  criticised  the  fact  that  Article  279  of  the 
Treaty was not referred to as the legal basis for adopting implementing measures and that the 
opinion of the Court was consequently not required. 

Since  the  references  to  the  Court’s  competences  are  not  required  in  this  context  and  it  is 
standard  practice  to  consult  the  Court  on  the  implementing  measures  in  this  field,  the 
proposed text has been streamlined to this effect. 

5 

Opinion No 4/2005 (OJ C 167, 7.7.2005, p. 1). 

EN 

7 

   EN 

 
                                                 
2006/0039 (CNS) 

Proposal for a 

COUNCIL DECISION 

on the system of the European Communities' own resources 

(//EC, Euratom) 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  establishing  the  European  Community,  and  in  particular 
Article 269 thereof, 

Having  regard  to  the  Treaty  establishing  the  European  Atomic  Energy  Community,  and  in 
particular Article 173 thereof, 

Having regard to the proposal from the Commission6, 

Having regard to the opinion of the European Parliament7, 

Having regard to the opinion of the Court of Auditors8, 

Having regard to the opinion of the European Economic and Social Committee9, 

Whereas: 

(1) 

(2) 

(3) 

The European Council meeting in Brussels on 15 and 16 December 2005 concluded, 
inter  alia,  that  the  own  resources  arrangements  should  be  guided  by  the  overall 
objective  of  equity.  These  arrangements  should  therefore  ensure,  in  line  with  the 
relevant  conclusions  of  the  1984  Fontainebleau  European  Council,  that  no  Member 
State  sustains  a  budgetary  burden  which  is  excessive  in  relation  to  its  relative 
prosperity.  It  is  therefore  appropriate  to  introduce  provisions  covering  specific 
Member States. 

The  Communities'  own  resources  system  must  ensure  adequate  resources  for  the 
orderly  development  of  the  Communities'  policies,  subject  to  the  need  for  strict 
budgetary discipline. 

For  the  purposes  of  this  Decision,  gross  national  income  (GNI)  is  defined  as  annual 
GNI at market prices as provided by the Commission in application of the European 

6 
7 
8 
9 

OJ C 
Opinion delivered on  
OJ C  
OJ C  

EN 

8 

   EN 

 
                                                 
(4) 

(5) 

(6) 

(7) 

(8) 

(9) 

system of national and regional accounts (hereinafter referred to as the ‘ESA 95’) in 
accordance with Council Regulation (EC) No 2223/9610. 

In view of the change-over from ESA 79 to ESA 95 for budgetary and own resources 
purposes and in order to maintain unchanged the amount of financial resources put at 
the  disposal  of  the  Communities  the  Commission  recalculated,  in  accordance  with 
Article 3(1) and 3(2) of Council Decision 2000/597/EC, Euratom11, the ceiling of own 
resources  and  the  ceiling  for  appropriations  for  commitments,  expressed  to  two 
decimal  places,  on  the  basis  of  the  formula  in  that  Article.  The  Commission 
communicated  the  new  ceilings  to  the  Council  and  the  European  Parliament  in 
December  200112.  The  ceiling  of  own  resources  is  set  equal  to  1.24 %  of  the  total 
GNIs of the Member States at market prices and a ceiling of 1.31 % of the total GNIs 
of  the  Member  States  is  set  for  appropriations  for  commitments.  The  European 
Council  of  15  and  16  December  2005  concluded  that  these  ceilings  should  be 
maintained at their current levels. 

In order to maintain unchanged the amount of financial resources put at the disposal of 
the  European  Communities,  it  is  appropriate  to  adapt  these  ceilings  expressed  in  per 
cent of GNI in case of modifications to the ESA 95 which entail a significant change 
in the level of GNI. 

Following  the  implementation  in  EU  law  of  the  agreements  concluded  during  the 
Uruguay  round  of  multilateral  trade  negotiations  there  is  no  longer  any  material 
difference between agricultural duties and customs duties. It is therefore appropriate to 
eliminate this distinction in the area of the EU budget. 

In  the  interests  of  transparency  and  simplicity  the  European  Council  of  15  and  16 
December  2005  concluded  that  the  uniform  rate  of  call  of  VAT  should  be  fixed  at 
0.30 %. 

The European Council of 15 and 16 December 2005 concluded that Austria, Germany, 
the Netherlands and Sweden should benefit from reduced VAT rates of call during the 
period  2007–2013  and  that  the  Netherlands  and  Sweden  should  benefit  from  gross 
reductions in their annual GNI-based contributions during the same period. 

The  European  Council  of  15  and  16  December  2005  concluded  that  the  correction 
mechanism  in  favour  of  the  United  Kingdom  should  remain,  along  with  the  reduced 
financing of the correction benefiting Germany, Austria, Sweden and the Netherlands. 
However,  after  a  phasing-in  period  between  2009  and  2011,  the  United  Kingdom 
should  participate  fully  in  the  financing  of  the  costs  of  enlargement,  except  for 
agricultural  direct  payments  and  market-related  expenditure  as  well  as  that  part  of 
rural  development  expenditure  originating  from  the  EAGGF  guarantee  section.  The 
calculation  of  the  correction  in  favour  of  the  United  Kingdom  will  therefore  be 
adjusted  by  progressively  excluding  expenditure  allocated  to  Member  States  which 
have  acceded  to  the  EU  after  30  April  2004,  except  for  the  agricultural  and  rural 
development expenditure mentioned above. The adjustment of the correction in favour 

10 

11 
12 

OJ L 310, 30.11.1996, p. 1, as last amended by Regulation (EC) No 1267/2003 (OJ L 180, 18.7.2003, 
p. 1). 
OJ L 253, 7.10.2000, p. 42. 
COM(2001) 801. 

EN 

9 

   EN 

 
                                                 
of the United Kingdom as a result of this reduction in allocated expenditure should not 
exceed  €  10.5  billion  in  2004  prices  during  the  period  2007–2013.  In  the  event  of 
further  enlargement  before  2013,  except  for  the  accession  of  Bulgaria  and  Romania, 
the amount should be adjusted accordingly. 

(10)  The European Council of 15 and 16 December 2005 concluded that the provisions of 
Article 4(f) in Decision 2000/597/EC, Euratom regarding the exclusion of the annual 
pre-accession expenditure in acceding countries from the calculation of the correction 
in  favour  of  the  United  Kingdom  should  cease to  apply  as  from  the  correction  to  be 
budgeted for the first time in 2014. 

(11)  The  European  Council  of  15  and  16  December  2005  called  on  the  Commission  to 
undertake  a  full,  wide-ranging  review  covering  all  aspects  of  EU  spending  and  of 
resources and to report in 2008/2009. Within this framework, the Commission should 
therefore  undertake  a  general  review  of  the  operation  of  the  own  resources  system, 
accompanied, if necessary, by appropriate proposals. 

(12)  Provisions must be laid down to cover the changeover from the system introduced by 

Decision 2000/597/EC, Euratom to that arising from this Decision. 

(13)  The  European  Council  of  15  and  16  December  2005  concluded  that  this  Decision 

should take effect on 1 January 2007, 

HAS DECIDED AS FOLLOWS: 

Article 1 

The Communities shall be allocated own resources in accordance with the rules laid down in 
the  following  Articles  in  order  to  ensure,  in  accordance  with  Article  269  of  the  Treaty 
establishing the European Community (hereinafter referred to as the ‘EC Treaty’) and Article 
173 of the Treaty establishing the European Atomic Energy Community (hereinafter referred 
to as the ‘Euratom Treaty’), the financing of the budget of the European Union. 

The  budget  of  the  European  Union  shall,  without  prejudice  to  other  revenue,  be  financed 
wholly from the Communities' own resources. 

Article 2 

1.  Revenue  from  the  following  shall  constitute  own  resources  entered  in  the  budget  of  the 
European Union: 

(a)  levies,  premiums,  additional  or  compensatory  amounts,  additional  amounts  or  factors, 
Common  Customs  Tariff  duties  and  other  duties  established  or  to  be  established  by  the 
institutions of the Communities in respect of trade with non-member countries, customs duties 
on products under the expired Treaty establishing the European Coal and Steel Community as 
well  as  contributions  and  other  duties  provided  for  within  the  framework  of  the  common 
organisation of the markets in sugar;  

(b)  without  prejudice  to  the  second  subparagraph  of  paragraph  4  of  this  Article,  the 
application of a uniform rate valid for all Member States to the harmonised VAT assessment 

EN 

10 

   EN 

 
bases  determined  according  to  Community  rules.  The  assessment  base  to  be  taken  into 
account for this purpose shall not exceed 50 % of GNI for each Member State, as defined in 
paragraph 7;  

(c)  without  prejudice  to  the  second  subparagraph  of  paragraph  5  of  this  Article,  the 
application  of  a  uniform  rate  -  to  be  determined  pursuant  to  the  budgetary  procedure  in  the 
light of the total of all other revenue - to the sum of all the Member States' GNIs. 

2.  Revenue  deriving  from  any  new  charges  introduced  within  the  framework  of  a  common 
policy, in accordance with the EC Treaty or the Euratom Treaty, provided that the procedure 
laid down in Article 269 of the EC Treaty or in Article 173 of the Euratom Treaty has been 
followed, shall also constitute own resources entered in the budget of the European Union. 

3. Member States shall retain, by way of collection costs, 25 % of the amounts referred to in 
paragraph 1(a). 

4. The uniform rate referred to in paragraph 1(b) shall correspond to 0.30 %. 

However, for the period 2007–2013, the rate of call of the VAT resource for Austria shall be 
fixed at 0.225 %, for Germany at 0.15 % and for the Netherlands and Sweden at 0.10 %. 

5. The uniform rate fixed under paragraph 1(c) shall apply to the GNI of each Member State. 

However, for the period 2007–2013, the Netherlands shall benefit from a gross reduction in 
its annual GNI contribution of € 605 million and Sweden from a gross reduction in its annual 
GNI contribution of € 150 million, measured in 2004 prices. These amounts shall be adjusted 
to current prices by applying the most recent GDP deflator for the EU expressed in euro, as 
provided by the Commission, which is available when the preliminary draft budget is drawn 
up. These gross reductions shall be granted after the calculation of the correction in favour of 
the United Kingdom and its financing referred to in Articles 4 and 5 of this Decision and shall 
have no impact thereupon. 

6.  If,  at  the  beginning  of  the  financial  year,  the  budget  has  not  been  adopted,  the  previous 
VAT and GNI rates of call shall remain applicable until the entry into force of the new rates. 

7.  For  the  purposes  of  applying  this  Decision,  GNI  shall  mean  GNI  for  the  year  at  market 
prices  as  provided  by  the  Commission  in  application  of  the  ESA  95  in  accordance  with 
Regulation (EC) No 2223/96. 

Should modifications to the ESA 95 result in significant changes in the GNI as provided by 
the Commission, the Council, acting unanimously on a proposal of the Commission and after 
consulting the European Parliament, shall decide when these modifications shall apply for the 
purposes of this Decision. 

Article 3 

1.  The  total  amount  of  own  resources  assigned  to  the  Communities  to  cover  payment 
appropriations may not exceed 1.24 % of the total GNIs of the Member States. 

2.  The  total  amount  of  commitment  appropriations  entered  in  the  general  budget  of  the 
European Union may not exceed 1.31 % of the total GNIs of the Member States. 

EN 

11 

   EN 

 
An  orderly  ratio  between  commitment  appropriations  and  payment  appropriations  shall  be 
maintained to guarantee their compatibility and to enable the ceiling pursuant to paragraph 1 
to be respected in subsequent years. 

3. In the case of modifications to the ESA 95 which result in significant changes in the level 
of  GNI  that  apply  for  the  purposes  of  this  Decision,  the  ceilings  for  payments  and 
commitments as determined in paragraphs 1 and 2 shall be recalculated by the Commission 
on the basis of the following formula: 

24.1

31.1%(

*%)

2tGNI

+−

1tGNI

+−

tGNI

ESA

current

2tGNI

+−

1tGNI

+−

tGNI

ESA

modified

where t is the latest full year for which data according to Council Regulation (EC, Euratom) 
No 1287/200313 (‘the GNI Regulation’) is available. 

Article 4 

1. The United Kingdom shall be granted a correction in respect of budgetary imbalances. 

This correction shall be established by: 

(a) calculating the difference, in the preceding financial year, between: 

- the percentage share of the United Kingdom in the sum of uncapped VAT assessment bases, 
and 

- the percentage share of the United Kingdom in total allocated expenditure;  

(b) multiplying the difference thus obtained by total allocated expenditure;  

(c) multiplying the result under (b) by 0,66;  

(d) subtracting from the result under (c) the effects arising for the United Kingdom from the 
changeover  to  capped  VAT  and  the  payments  referred  to  in  Article  2(1)(c),  namely  the 
difference between: 

- what the United Kingdom would have had to pay for the amounts financed by the resources 
referred to in Article 2(1)(b) and (c), if the uniform rate had been applied to non-capped VAT 
bases, and 

- the payments of the United Kingdom pursuant to Article 2(1)(b) and (c);  

(e) subtracting from the result under (d) the net gains of the United Kingdom resulting from 
the increase in the percentage of resources referred to in Article 2(1)(a) retained by Member 
States to cover collection and related costs;  

(f) calculating, at the time of each enlargement of the European Union, an adjustment to the 
result under (e) so as to reduce the compensation, thereby ensuring that expenditure which is 

13 

OJ L 181, 19.7.2003, p. 1. 

EN 

12 

   EN 

 
 
                                                 
unabated before enlargement remains so after enlargement. This adjustment shall be made by 
reducing  total  allocated  expenditure  by  an  amount  equivalent  to  the  annual  pre-accession 
expenditure in the acceding countries. All amounts so calculated shall be carried forward to 
subsequent years and shall be adjusted annually by applying the latest available GDP deflator 
for the EU expressed in euro, as provided by the Commission. The present point shall cease to 
apply as from the correction to be budgeted for the first time in 2014; 

(g)  adjusting  the  calculation,  by  reducing  total  allocated  expenditure  by  total  allocated 
expenditure  in  Member  States  that  have  acceded  to  the  EU  after  30  April  2004,  except  for 
agricultural  direct  payments  and  market-related  expenditure  as  well  as  that  part  of  rural 
development expenditure originating from the EAGGF guarantee section.  

This reduction shall be progressively phased in according to the schedule below. 

UK correction to be budgeted 
for the first time in the year: 

Percentage of enlargement-related 
expenditure (as defined above) to be 
excluded from the calculation of the 
correction in favour of the United 
Kingdom 

2009 

2010 

2011 

20 

70 

100 

2.  During  the  period  2007–2013  the  total  adjustment  of  the  United  Kingdom  correction 
resulting  from  the  reduction  of  allocated  expenditure  referred  to  in  paragraph  (1)(g)  above 
shall not exceed € 10.5 billion, measured in 2004 prices. Each year, the Commission services 
shall verify whether the cumulated adjustment of the correction exceeds this amount. For the 
purpose of this calculation, amounts in current prices shall be converted into 2004 prices by 
applying the latest available GDP deflator for the EU expressed in euro, as provided by the 
Commission. If the ceiling of € 10.5 billion is exceeded, the United Kingdom’s contribution 
shall be reduced accordingly. 

In  the  event  of  further  enlargement  before  2013,  with  the  exception  of  the  accession  of 
Bulgaria and Romania, the ceiling of € 10.5 billion shall be adjusted upwards accordingly. 

Article 5 

1. The cost of the correction shall be borne by the other Member States in accordance with the 
following arrangements: 

The distribution of the cost shall first be calculated by reference to each Member State's share 
of  the  payments  referred  to  in  Article  2(1)(c),  the  United  Kingdom  being  excluded  and 
without  taking  account  of  the  gross  reductions  in  the  GNI-based  contributions  of  the 
Netherlands and Sweden referred to in Article 2(5); it shall then be adjusted in such a way as 
to restrict the financing share of Austria, Germany, the Netherlands and Sweden to one fourth 
of their normal share resulting from this calculation. 

2.  The  correction  shall  be  granted  to  the  United  Kingdom  by  a  reduction  in  its  payments 
resulting from the application of Article 2(1)(b) and (c). The costs borne by the other Member 

EN 

13 

   EN 

 
 
States shall be added to their payments resulting from the application for each Member State 
of Article 2(1)(b) and (c). 

3. The Commission shall perform the calculations required for the application of Article 2(5), 
Article 4 and this Article. 

4. If, at the beginning of the financial year, the budget has not been adopted, the correction 
granted to the United Kingdom and the costs borne by the other Member States as entered in 
the last budget finally adopted shall remain applicable. 

The  revenue  referred  to  in  Article  2  shall  be  used  without  distinction  to  finance  all 
expenditure entered in the budget. 

Article 6 

Any surplus of the Communities' revenue over total actual expenditure during a financial year 
shall be carried over to the following financial year. 

Article 7 

Article 8 

1.  The  Communities'  own  resources  referred  to  in  Article  2(1)(a)  shall  be  collected  by  the 
Member  States  in  accordance  with  the  national  provisions  imposed  by  law,  regulation  or 
administrative action, which shall, where appropriate, be adapted to meet the requirements of 
Community rules. 

The Commission shall examine at regular intervals the national provisions communicated to it 
by the Member States, transmit to the Member States the adjustments it deems necessary in 
order to ensure that they comply with Community rules and report to the budget authority. 

Member States shall make the resources provided for in Article 2(1)(a) to (c) available to the 
Commission. 

2. The Council shall, in accordance with the procedure laid down in Article 279(2) of the EC 
Treaty,  adopt  the  provisions  necessary  to  apply  this  Decision  and  to  make  possible  the 
inspection  of  the  collection,  the  making  available  to  the  Commission  and  payment  of  the 
revenue referred to in Articles 2 and 5. 

Article 9 

In the framework of the full, wide-ranging review covering all aspects of EU spending and of 
resources  on  which  it  shall  report  in  2008/2009,  the  Commission  shall  undertake  a  general 
review of the own resources system, accompanied, if necessary, by appropriate proposals. 

EN 

14 

   EN 

 
Article 10 

1. Member States shall be notified of this Decision by the Secretary-General of the Council 
and the Decision shall be published in the Official Journal of the European Union. 

Member  States  shall  notify  the  Secretary-General  of  the  Council  without  delay  of  the 
completion  of  the  procedures  for  the  adoption  of  this  Decision  in  accordance  with  their 
respective constitutional requirements. 

This Decision shall enter into force on the first day of the month following receipt of the last 
of  the  notifications  referred  to  in  the  second  subparagraph.  It  shall  take  effect  on  1  January 
2007. 

2. (a) Subject to (b), Decision 2000/597/EC, Euratom shall be repealed as of 1 January 2007. 
Any  references  to  the  Council  Decision  of  21  April  1970  on  the  replacement  of  financial 
contributions from Member States by the Communities' own resources14, to Council Decision 
85/257/EEC,  Euratom  of  7  May  1985  on  the  Communities'  system  of  own  resources15,  to 
Decision  88/376/EEC,  Euratom16,  to  Decision  94/728/EC,  Euratom17  or  to  Decision 
2000/597/EC, Euratom shall be construed as references to this Decision. 

(b)  Articles  2,  4  and  5  of  Decisions  88/376/EEC,  Euratom,  94/728/EC,  Euratom  and 
2000/597/EC,  Euratom  shall  continue  to  apply  to  the  calculation  and  adjustment  of  revenue 
accruing from the application of a uniform rate valid for all Member States to the VAT base 
determined  in  a  uniform  manner  and  limited  between 50 % to 55 % of  the  GNP or  GNI of 
each Member State, depending on the relevant year, and to the calculation of the correction of 
budgetary imbalances granted to the United Kingdom for the years 1988 to 2006. 

(c) For amounts referred to in Article 2(1)(a) which should have been made available by the 
Member States before 28 February 2001 in accordance with the applicable Community rules, 
Member States shall continue to retain 10 % of these amounts by way of collection costs. 

Done at Brussels,  

For the Council 
The President 

14 
15 
16 
17 

OJ L 94, 28.4.1970, p. 19. 
OJ L 128, 14.5.1985, p. 15. 
OJ L 185, 15.7.1988, p. 24. 
OJ L 293, 12.11.1994, p. 9. 

EN 

15 

   EN 

 
 
 
                                                 
COMMISSION WORKING DOCUMENT 

on calculation, financing, payment and entry in the budget of the correction of 
budgetary imbalances in favour of the United Kingdom (‘the UK correction’) in 
accordance with Articles 4 and 5 of Council Decision 2006/xxx/EC, Euratom on the 
system of the European Communities’ own resources18 

18 

OJ L 

EN 

16 

   EN 

 
                                                 
INTRODUCTION 

In accordance with the conclusions of the European Council of 15 and 16 December 2005 and 
the  Council  Decision  on  the  system  of  the  Communities'  own  resources  of  (.........),  this 
document  replaces  the  Commission  working  document  10646/00  of  21  September  200019. 
Unless otherwise stated, any references to Articles relate to the Own Resources Decision of 
(…..), hereinafter referred to as the 2006 ORD. 

This document lays down the following provisions for the UK correction: 

(1) 

the calculation of the amount of the correction of a given year, 

(2) 

its financing in the following year, 

(3) 

definitions of budgetary aggregates, 

(4) 

the entry of the correction in the budget. 

The modifications to the own resources system deriving from the conclusions of the European 
Council of 15-16 December 2005 have no impact on the UK correction for the years prior to 
2007.  Having  regard  to  the  entry  into  force  of  the  2006  ORD,  the  provisions  of  the  present 
document shall take effect on 1 January 2007. They shall, therefore, apply starting with the 
calculation of the UK correction originating in the year 2007, to be budgeted for the first time 
in 2008.  

1. 

THE UK CORRECTION 

1.1. 

The calculation of the correction (Article 4 of the 2006 ORD) 

The calculation of the amount of the correction of year t in accordance with Article 4 shall be 
established by: 

(a) 

calculating the difference between: 

–  the  percentage  share  of  the  United  Kingdom  in  the  total  sum  of  uncapped  VAT 

bases, and 

–  the percentage share of the United Kingdom in total allocated expenditure; 

(b)  multiplying  the  difference  thus  obtained  under  (a)  by  total  allocated 

expenditure; 

(c) 

multiplying the result obtained under (b) by 0.66; 

•  The result obtained in steps (a) to (c) shall be called the original amount of the 

UK correction; 

19 

Calculation,  financing,  payment  and  entry  in  the  budget  of  the  correction  of  budgetary  imbalances  in 
accordance  with  Articles  4  and  5  of  the  Council  Decision  on  the  system  of  the  EU's  own  resources, 
Council of the European Union, 10646/00 ADD 2, of 21 September 2000. 

EN 

17 

   EN 

 
                                                 
(d) 

subtracting from the result obtained under (c) the difference between 

–  the product of the percentage share of the United Kingdom in the uncapped VAT 
bases times the total payments by all Member States referred to in Article 2(1)(b) 
and (c) relating to the financial year t in question (i.e. the payments that the United 
Kingdom  would  have  made  had  the  GNI  resource  not  existed  and  the  VAT 
resource  not  been  capped)  for  the  financing  of  total  expenditure  (as  defined  in 
point 3.1 infra); 

and 

–  the payments by the United Kingdom referred to in Article 2(1)(b) and (c) relating 
to the financial year t for the financing of total expenditure (as defined in point 3.1 
infra),  excluding  payments  to  finance  the  gross  reductions  in  the  GNI-based 
contributions of the Netherlands and Sweden referred to in Article 2(5); 

•  the difference referred to in step (d) will be called the UK advantage (because it 
is the advantage that the UK derives from the VAT capping, the reduction of the 
VAT uniform rate and the introduction of the GNI resource);  

•  the result  obtained  by subtracting the UK advantage from  the original amount 

(i.e. the result of step (d)) shall be called the core UK correction; 

(e) 

subtracting  from  the  result  under  (d)  the  gains  for  the  United  Kingdom 
resulting from the increase (from 10 % to 25 %) in the percentage of resources 
referred  to  in  Article  2(1)(a)  retained  by  Member  States  to  cover  their 
collection costs. 

This  implies  deducting  from  the  result  obtained  under  (d)  the  result  of  the 
multiplication between: 

–  20 % of the net total resources referred to in Article 2(1)(a) entered into the EU 

budget after deduction of the collection costs, and 

–  the difference between the United Kingdom's share in the resources referred to in 

Article 2(1)(a) and its share in the uncapped EU VAT base.  

•  the  gains  referred  to  in  step  (e)  will  be  called  the  TOR  (traditional  own 

resources) windfall gains; 

•  Subtracting the TOR windfall gains from the core UK correction will complete 

the calculation of the UK correction (i.e. the result under (e)); 

(f) 

From  the  first  year  of  enlargement  (i.e.  2004)  total  allocated  expenditure, 
referred  to  above  under  (a)  second  hyphen  and  (b),  shall  be  reduced  by  an 
amount equal to pre-accession expenditure of the last year before enlargement 
(i.e. 2003). 

This adjustment changes the result obtained under (c) (the original amount) and 
therefore  the  result  under  (e).  The  amount  equal  to  pre-accession  expenditure 
shall be carried forward to subsequent years and shall be adjusted annually by 

EN 

18 

   EN 

 
 
 
 
 
applying  the  latest  available  GDP  deflator  for  the  EU  expressed  in  euro,  as 
provided by the Commission.  

On  the  occasion  of  any  subsequent  accession  the  same  procedure  shall  be 
followed. 

The  present  point  (f)  shall  cease  to  apply  as  from  the  2013  correction,  to  be 
budgeted for the first time in 2014. 

(g) 

As  from  the  2008  correction,  to  be  budgeted  for  the  first  time  in  2009,  total 
allocated expenditure, referred to above under (a) second hyphen and (b), shall 
be reduced by total allocated expenditure in Member States that have acceded 
to  the  EU  after  30  April  2004,  except  for  agricultural  direct  payments  and 
market-related  expenditure  as  well  as  that  part  of  rural  development 
expenditure originating from the EAGGF guarantee section. 

This  reduction  shall  be  progressively  phased  in  according  to  the  schedule 
below. 

UK correction to be budgeted 
for the first time in the year: 

Percentage of enlargement-related 
expenditure (as defined above) to be 
excluded from the calculation of the 
UK correction: 

2009 

2010 

2011 

20 

70 

100 

During  the  period  2007–2013  the  total  adjustment  of  the  UK  correction, 
resulting  from  the  exclusion  of  enlargement-related  expenditure  referred  to 
above,  (hereinafter  called  the  UK  correction  adjustment)  shall  not  be  higher 
than € 10.5 billion, measured in 2004 prices. At the occasion of each budgeting 
of  the  UK  correction,  the  Commission  services  shall  verify  whether  the 
cumulated UK correction adjustment exceeds this amount. For the purpose of 
this calculation, amounts in current prices shall be converted into 2004 prices 
by applying the latest available GDP deflator for the EU expressed in euro, as 
provided  by  the  Commission.  If  the  ceiling  of  €  10.5  billion  is  exceeded,  the 
UK  contribution  shall  be  reduced  accordingly.  The  reduction  of  the  UK 
contribution  shall  take  place  through  an  adjustment  of  the  amount  of  the  UK 
correction. 

In the event of enlargement in the period 2006–2012, with the exception of the 
accession  of  Bulgaria  and  Romania,  the  ceiling  of  €  10.5  billion  shall  be 
adjusted  upwards  by  the  impact  of  this(ese)  enlargement(s)  on  the  UK 
correction  adjustment.  This  impact  shall  be  calculated  by  comparing  the  UK 
correction  adjustment  including  the  acceding  country(ies)  with  the  UK 
correction  adjustment  excluding  the  acceding  country(ies).  The  difference 
between the two shall be converted into 2004 prices and added to the ceiling. 

EN 

19 

   EN 

 
 
 
 
 
 
 
 
 
The adjustment of the ceiling shall be updated in each subsequent year in the 
context of the calculation and budgeting of the UK correction. 

1.2. 

Formalisation of the calculation of the UK correction 

The UK correction of a year t (to be budgeted for the first time in year t+1) is equal to: 

UK correctiont =Original amountt – UK advantaget – TOR windfall gainst 

The precise determination of each element is as follows: 

ORIGINAL AMOUNT – (points 1.1(a) to 1.1(c), including points 1.1(f) and 1.1(g)) 

Original amount t =  

= 0.66 * 






ncVAT
t
ncVAT
t

UK

EU

−

UK
AE
t
newMS
NAgE
t

EU
AE
t

−

−

PAE

AC
INFL

1t
−

*(

EU
AE
t






−

newMS
NAgE
t

−

PAE

AC
INFL

1t
−

)

where 

ncVAT

t

XX

= 
tAE

XX

 = non-capped VAT base of Member State/group of Member States XX (where  XX 

UK 

or 

EU) 

in 

year t; 

  =  EU  expenditure  allocated  to  XX  (where  XX  =  UK  or  EU)  in  year t; 
newMS
NAgE
t

= non-agricultural EU expenditure (as defined in point (g) above) allocated in 
year t  to  Member  States  which  have  acceded  to  the  EU  after  30  April  2004,  subject  to 
phasing-in as defined in point 1.1(g) above; 

PAE

AC
INFL

1t
−  

=  pre-accession  expenditure  (as  defined  in  point  1.1(f)  above)  allocated  to 
Acceding  Countries  in  the  year  before  accession,  adjusted  for  inflation  to  year  t-1.  This 
element shall be eliminated from the calculation as from the correction originating in 2013, to 
be first budgeted in 2014. It can be further expressed as: 

PAE

AC
INFL

1t
−  = 

Until

2012

(

PAE

AC
1i
−

*

*

∑

i

Deflator

GDP
1t/1i
−

−

)

where 

Until

2012

= 1 until year t equals 2012 and 0 as from 2013 onwards; 

i 

= the year(s) between 2004 and year t when an enlargement occurs; 

Deflator
i

GDP
/1 −
1
t
−

  = the latest available GDP deflator for the EU expressed in euro, as provided 

by the Commission, for the period i-1 to t-1. 

CEILING  ON  THE  TOTAL  2007–2013  UK  CORRECTION  ADJUSTMENT  RELATED  TO 
THE  EXCLUSION  FROM  THE  UK  CORRECTION  OF  ‘NON-AGRICULTURAL  EU 

EN 

20 

   EN 

 
 
 
 
 
EXPENDITURE’  IN  MEMBER  STATES  THAT  HAVE  ACCEDED  TO  THE  EU  AFTER  30 
APRIL 2004 

During the period 2007–2013 the UK correction adjustment related to the exclusion from the 
UK correction of ‘non-agricultural EU expenditure’ (as defined in point (g) above) allocated 
to Member States which have acceded to the EU after 30 April 2004 shall not exceed, in 2004 
prices, a ceiling of € 10.5 billion (this ceiling being adjusted for any enlargement which may 
occur  between  the  years  2006  and  2012,  except  for  the  enlargement  to  Bulgaria  and 
Romania). 

This means that the following total 2008–2012 reduction of the UK correction (the reduction 
is phased in as from the 2008 correction, to be first budgeted in 2009, and the ceiling applies 
as to the 2012 correction, to be first budgeted in 2013), which is equal to 

*66.0

t

2012

∑

=

2008





ncVAT
t
ncVAT
t

UK

EU

%*

reduc
t

*

lnal
NAgE
t

ewMS

/

Deflator

GDP
2004


− 


t

shall not exceed the ceiling of € 10.5 billion, increased, if applicable, by the following amount 
(in €): 

2012

∑

=

2008


%



reduc
t

*





ncVAT
t
ncVAT
t

UK

EU

*

lnal
NAgE
t

ewMS

−

UK

ncVAT
t
27-EU
ncVAT
t

*

12
NAgE
t

newMS

/





*66.0

t

where 

Deflator

GDP
2004


− 
t


ncVAT

t

XX

 = non-capped VAT base of Member State/group of Member States XX (where XX 

= UK, EU or EU-27) in year t; 

lnal
NAgE
t

ewMS

  = non-agricultural EU expenditure (as defined in point (g) above) allocated in 

year t to all Member States which have acceded to the EU after 30 April 2004; 

12
NAgE
t

newMS

  = non-agricultural EU expenditure (as defined in point (g) above)  allocated in 
year t to the 10 Member States which have acceded to the  EU  on  1 May 2004  as  well  as 
Bulgaria and Romania. 

%

reduc

t

= percentage reduction of NAgE corresponding to year t (i.e. 0% before 2008; 

20% for 2008; 70% for 2009 and 100% from 2010 onwards); 

Deflator

GDP
2004

−   = the latest available GDP deflator for the EU expressed in euro, as provided 
t

by the Commission, for the period 2004 to year t. 

If  the  adjusted  ceiling  is  exceeded  (in  any  year  until  2013),  the  UK  correction  shall  be 
increased  by  the  excess  amount.  The  UK  corrections  of  subsequent  years  shall  also  be 
adjusted to ensure that the ceiling is not exceeded, up until and including the UK correction 
originating in the year 2012, to be first budgeted in 2013. 

UK ADVANTAGE (point 1.1(d) above) 

EN 

21 

   EN 

 
 
 
 
UK advantage t = 

ncVAT
t
ncVAT
t

UK

EU

(
GNIP
t

*

EU

+

cVATP
t

EU

)

−

(
GNIP
t

UK

+

cVATP
t

)UK

where 

ncVAT

t

XX

= non-capped VAT base of Member State/group of Member States XX (where 

XX = UK or EU) in year t; 

XX

tGNIP

cVATP
t

XX

= Total GNI payments made by XX (where XX = UK or EU) in year t; 

= Total capped VAT payments made by XX (where XX = UK or EU) in year t; 

TOR WINDFALL GAINS (point 1.1(e) above) 

TOR windfall gainst = 0.20 * 

TOR

EU
t

 * 

TOR
TOR

UK
t
EU
t






−

ncVAT
t
ncVAT
t

UK

EU






where 

TOR

XX
t

= net traditional own resources of Member State/group of Member States XX 

(where XX= UK or EU) in year t; 

ncVAT

t

XX

= non-capped VAT base of XX (where XX = UK or EU) in year t. 

2. 

FINANCING OF THE UK CORRECTION IN THE FOLLOWING YEAR (ARTICLE 5 OF THE 
2006 ORD) 

The cost of the UK correction of year t shall be borne by the other Member States in year t+1 
in accordance with the following arrangements: 

a) 

b) 

The distribution of the cost shall be calculated by reference to each Member State's 
share in the payments referred to in Article 2 (1) (c) relating to year t+1, the United 
Kingdom  being  excluded  and without  taking account of the  gross reductions in the 
GNI-based contributions of the Netherlands and Sweden referred to in Article 2(5);  

it  shall  then  be  adjusted  in  such  a  way  as  to  allow  the  restriction  of  the  share  of 
Germany, of the Netherlands, of Austria and of Sweden to one-fourth of the shares 
resulting from the calculation under (a); 

The  amount  of  the  correction  is  granted  to  the  United  Kingdom  by  a  reduction  in  its  VAT 
payments;  if  the  amount  of  the  correction  exceeds  the  VAT  payments,  the  correction  is 
granted by a reduction in its GNI payments. 

The costs borne by the other Member States shall be added to their VAT and GNI payments. 

The table below presents an example to illustrate the implementation of the above calculation 
method on the basis of the GNI estimates entered in the 2006 adopted budget. 

EN 

22 

   EN 

 
 
 
 
 
 
 
 
CALCULATION OF THE FINANCING OF THE UK CORRECTION

Member States

Percentage 
share in GNI(1)

Percentage 
share excluding 
the UK

3/4 of the shares 
of DE, NL, AT 
and SE in column 
(2)

Column (3) 
distributed 
between Member 
States other than 
the UK, DE, NL, 
AT and SE

Financing scale

(1)

(2)

(3)

(4)

(5) = (2) + (3) + (4)

Belgium
Czech Republic
Denmark
Germany
Estonia
Greece
Spain
France
Ireland
Italy
Cyprus
Latvia
Lithuania
Luxembourg
Hungary
Malta
Netherlands
Austria
Poland
Portugal
Slovenia
Slovak Republic
Finland
Sweden
United Kingdom

2,82
0,90
1,89
20,58
0,09
1,71
8,12
15,89
1,28
13,04
0,12
0,12
0,19
0,23
0,82
0,04
4,39
2,24
2,16
1,29
0,26
0,36
1,46
2,78
17,24

3,41
1,08
2,29
24,86
0,11
2,06
9,81
19,20
1,54
15,75
0,15
0,14
0,23
0,28
0,99
0,05
5,30
2,70
2,61
1,56
0,32
0,43
1,76
3,36
0,00

-18,65

-3,98
-2,03

-2,52

1,45
0,46
0,97
0,00
0,05
0,88
4,18
8,18
0,66
6,71
0,06
0,06
0,10
0,12
0,42
0,02
0,00
0,00
1,11
0,66
0,14
0,18
0,75
0,00
0,00

4,86
1,55
3,26
6,22
0,15
2,94
13,99
27,37
2,20
22,47
0,21
0,20
0,33
0,40
1,41
0,07
1,33
0,68
3,73
2,22
0,46
0,61
2,51
0,84
0,00

Total

100,00

100,00

-27,17

27,17

100,00

(1) GNI forecast entered in the adopted 2006 budget.

Member  States'  shares  in  GNI  payments  (Article  2(1)(c))  in  year  t+1  are  shown  in  the  first 
column of the  table.  The  second  column presents the shares  obtained according to point (a) 
supra.  The  third  column  shows  the  reduction  in  the  shares  of  Germany,  the  Netherlands, 
Austria  and  Sweden  (three-fourth  of  their  shares  resulting  from  point  (a)  supra),  and  the 
fourth  column  reflects  the  distribution  of  the  reductions  for  Germany,  the  Netherlands, 
Austria and Sweden among the other Member States excluding these four countries and the 
United Kingdom. 

Finally, column 5 shows the shares in the financing of the UK correction resulting from this 
calculation. 

3. 

DEFINITION OF BUDGETARY AGGREGATES 

3.1 

Total expenditure of year t 

The concept of expenditure to be used in the calculation of the UK correction corresponds to 
actual  payments  (execution  of  appropriations  for  payments)  relating  to  the  year  in  question 

EN 

23 

   EN 

 
 
(year t), pursuant to either that year's budget appropriations or to carryovers of non-executed 
appropriations to the following year (from year t to the year t+1). Only utilised appropriations 
for payments, that is the amount of payments actually made, shall be taken into account. 

3.2. 

Total allocated expenditure 

The allocation across Member States of total expenditure, as defined under point 3.1 above, is 
governed by the following rules:  

In  general,  payments  are  allocated  to  the  Member  State  in  which  the  principal  recipient 
resides. However, in those cases where the Commission is aware that the recipient in question 
acts as an intermediary, the payments must be allocated whenever it is possible to the Member 
State(s) in which the final beneficiary(ies) is(are) resident, in accordance with their shares in 
these payments. 

Certain components of expenditure cannot be allocated either fully or partially to the Member 
States.  Starting  from  total  expenditure  of  the  general  budget  of  the  European  Union  as  the 
basis,  at  least  two  main  categories  of  expenditure  need  to  be  excluded  (though  this  list  is 
indicative and not necessarily exhaustive): 

1. 

2. 

External expenditure, corresponding mainly to heading 4 – EU as a global player - of 
the financial framework for 2007–2013 appearing in the conclusions of the European 
Council of 15–16 December 2005. 

This  category  also  includes  expenditure  under  other  headings  benefiting  recipients 
outside  the  Union,  such  as  development  co-operation,  research  expenditure  spent 
outside the EU, administrative expenditure paid to recipients outside the Union, etc.  

Expenditure that can not be allocated or identified. This could be due to conceptual 
difficulties,  such  as  expenditure  on  representation,  on  missions  and  on  formal  and 
other  meetings  as  well  as  payments  related  to  cross-border  Community  initiatives, 
promotion of inter-regional co-operative operations and other cross border actions. 

The definition of allocated expenditure corresponds in principle to Headings 1, 2, 3, 5 and 6 
of  the  financial  framework  for  2007–2013  appearing  in  the  conclusions  of  the  European 
Council of 15–16 December 2005. 

3.3. 

Pre-accession expenditure 

Pre-accession expenditure that has to be taken into account for the purpose of calculating the 
adjustment for enlargement in Article 4(1)(f) is allocated expenditure (as defined in points 3.1 
and 3.2 above) to acceding countries in the last year before the year of accession. 

4. 

ENTERING THE UK CORRECTION OF YEAR T INTO THE BUDGET 

4.1. 

Provisional estimate (to be entered in the Preliminary Draft Budget of year t+1) 

A provisional calculation of the amount of the UK correction of year t shall be performed on 
the occasion of the preliminary draft budget (PDB) of year t+1. The calculation shall be based 
on the most recent and available data for both contributions and expenditure.  

EN 

24 

   EN 

 
The amount of the UK correction shall take the form of a reduction of the UK VAT and GNI 
payments. The other Member States shall see their VAT and GNI payments increased by the 
amount of their respective share in the financing.  

4.2. 

Update of the provisional estimate (between the year t+1 and the year t+3) 

If  need  be,  the  Commission  has  the  possibility  to  propose  an  update  of  the  provisional 
estimate at any time between the year t+1 and the year t+3. Such an update shall be entered in 
a preliminary draft amending budget (PDAB). 

The update shall be proposed if the Commission has ground to believe that the initial forecast 
of  the  provisional  calculation  will  differ  significantly  from  the  definitive  calculation  (see 
infra) of the UK correction to be proposed in the PDAB of year t+4.  

An update could also be proposed if it emerges that the estimated GNI bases entered in the 
PDB  of  year  t+1  will  differ  significantly  from  the  definitive  GNI  bases,  thus  changing 
significantly the sharing of the financing of the UK correction.  

4.3. 

Definitive  calculation  of  the  UK  correction  (to  be  entered  in  a  PDAB  of  year 
t+4) 

4.3.1.  Calculation of the definitive amount 

The procedure to calculate the definitive amount of the correction is set out in section 1 of this 
document.  

The data to be used in the calculation of the definitive UK correction are the VAT and GNI 
bases  and  the  allocated  expenditure  estimates  relating  to  year  t  as  they  are  known  at  31 
December t+3 and shall be converted to € at the annual average exchange rate of the year t.  

In  order  to  estimate  the  ‘UK  advantage’  for  the  definitive  calculation  (section  1.1(d)) 
contributions  of  traditional  own  resources  and  other  revenues  in  year  t  must  be  taken  into 
account.  This  implies  that  it  is  necessary  to  recalculate  a  notional  budget  on  the  basis  of 
definitive data for any type of resource and revenue. 

4.3.2.  Calculation of the definitive financing of the correction and its entering in the budget 

Section  2  previously  sets  out  the  procedure  to  calculate  the  financing  of  the  definitive 
correction. 

The definitive financing data shall be the VAT and GNI bases of year t+1 as they are known 
at 31 December t+3. 

The final financing data shall be compared with the payments already entered in the budget 
(i.e. in the budget of t+1 and possibly in the budget of t+2 or t+3 if an update has been made 
in those years).  

The  differences  per  Member  State  shall  be  entered  in  an  appropriate  budget  chapter  of  a 
PDAB of the year t+4 and converted into  national currency at the  annual  average  exchange 
rate of the year of the financing of the correction (year t+1). 

EN 

25 

   EN